Nxera Pharma Co., Ltd. (4565) Earnings Call Transcript & Summary

[Interpreted] We'll now start the R&D Day of Sosei Group. Thank you very much for taking time out of your busy schedule to attend this R&D Day today. I am Nomura, CFO, and I will serve as the moderator. Outside of this room, we have some retail investors participating online. Thank you very much the individual investors also for participating. We have camera at the back of the room. Camera will only shoot the stage and so you will not be in the photo. So our R&D, as Chris will explain later, this R&D Day is the first time in 3 years. COVID-related restriction is finally lifted, and we can now welcome foreign travelers too, so we are having this for the first time in 3 years. So today's program, as already been informed, first, the business overview and then the R&D and pipeline update. And lastly, some in-house program. The presentation will be a little over 1 hour, followed by Q&A. We plan to end at 5:30. [Operator Instructions] We will take questions as much as time allows later. Today, we have 3 speakers who will speak in English. We have the simultaneous interpretation equipment on your table. Channel 1 is Japanese. Channel 2 is English. And Zoom participants, on the lower right, you have the globe mark where you can choose your language. So please choose the language you like. If you do not choose anything, you will hear the speaker's original voice. The material, the screen is a bit small, but the material is posted on the IR section of our website. So please take a look. So that is all from me. Thank you. Chris, the floor is yours.

Thank you, Hiro. Good afternoon, everyone. It's great to be back in Japan. It's very nice to see all of your faces again. For those of you that haven't met me, my name is Chris Cargill. I'm the CEO of Sosei Group Corporation. Today, I'm joined by my fellow executives and scientific colleagues. We've got Matt Barnes, Head of U.K. R&D innovation; Rie Suzuki, who's a senior leader in our translational medicine team; Kieran Johnson, Chief Accounting Officer; and Hironoshin Nomura, our Chief Financial Officer. So I'm going to begin with an overview of our short, mid and kind of long-term objectives as we aim to build one of Japan's world-leading biotech businesses. Perfect. So I'll begin with our vision. So the vision is quite simple, taking Western innovation, fusing it with Japanese quality. So our mission or our call to action is to translate world-leading science into life-changing medicines. We are uniquely positioned to achieve this mission, and it starts with our Western innovation engine, which is located in Cambridge in the United Kingdom in the biotech hub there. Our near- to mid-term focus is to ensure that our Western innovation platform remains world leading. The U.K. is renowned for its discovery research and the U.K. biotech industry is well formed with outstanding access to talent, and we plan to be innovating at our Cambridge U.K. hub for many, many years to come. Over the long term, we plan to bring these innovative medicines that we create in the U.K., together with medicines that we in-license from U.S. or EU partners for quality development in Japan to benefit Japanese patients that are waiting. So our long-term vision is to leverage Japan's world-leading strength in quality across all aspects of manufacturing, clinical and disease knowledge and medical and scientific engagement. So it's Western innovation and Japanese quality, world-leading science, life-changing medicines. This is the vision at Sosei. So our employees globally know this slide very well because it's one that we use at our internal town hall meetings every quarter. In the middle of the slide, there are 3 guiding principles that drive excellence at Sosei: being science-led, being patient-focused and being program-centric or team oriented. In addition to these principles, there are 4 clear and transparent objectives that we have to build a business that we can all be proud of. So firstly, number one, our near-term objective is to transform R&D to be both translational medicine led or TM led and to be program centric; secondly, our midterm objective is to enhance the group structure and its operational efficiency; thirdly, our long-term objective is to activate our Japan biotech business; and lastly, another long-term objective we have is to expand into new geographic markets. And I'll now discuss these 4 objectives in more detail. So I'll begin with the first objective, which is our near-term focus to transform R&D to be TM-led R&D. So what do we mean when we say we want to transform and be TM led with R&D? Well, historically, the company's approach was to work on targets that were already clinically validated, attempt better chemistry and hope that we would create best-in-class drugs of interest in this approach. It still makes sense for selected programs and diseases. However, for us to create real value and to make a real difference to patients, we need to add novel first-in-class targets to our portfolio because this is what the industry is continuously searching for. Now Matt will talk to this later, but at Sosei, we leverage external data, technologies and innovation partners to bring critical information into the discovery cycle sooner. We do this to accelerate how we choose the right target for a specific disease, how we discover the right asset to modulate that target and then to test the right therapeutic hypothesis to identify the patients that will benefit most. So on this next slide, the diagram across the top, it shows the typical path for traditional drug discovery and development, and we know a lot about this. Typically, it takes longer than 10 years and more than USD 1 billion to bring a new drug to the global market. We know less than 10% of drugs discovered are successfully approved. The probability of success is extremely low. Yet despite these high levels of attrition, there's a few companies in the industry that properly embrace these facts. There's too many companies that are focused on keeping programs alive for as long as possible, which is very unproductive and capital intensive. So on the bottom of this slide, what we're really trying to show here is how our TM-led approach will work. It helps us to gain critical information earlier in the drug discovery and development process, which enables us to accelerate faster or alternatively kill programs faster. The biggest problem in this industry is there's too many programs that should have been killed earlier and they're not. And therefore, there's enormous amounts of capital that are wasted. So under this leadership group at Sosei, we will kill programs in the future if they don't meet our thresholds to continue, and that's because killing programs earlier during the cheaper phases of drug development enables us to reinvest the capital in TM-led R&D programs that may have a markedly greater impact from patients out there that are waiting. So this TM-led approach to testing the hypothesis allows us to be more productive, optimize our use of capital and in doing so create value by potentially enhancing the probability of technical success along the drug discovery journey. So the left-hand side of this slide shows historically how we have built out our organizational capabilities. Clearly, over the next decade as we build our TM capability, we expect TM to add significant value to our programs, and therefore, also directly contribute to corporate value growth. Partnering with big pharma and biotech companies for the major patient markets of the U.S. and the EU is going to remain a core part of our business model. And we know that programs that are TM led tend to attract much larger transaction economics as evidenced on this slide by the upfront that we received from Neurocrine last year for a Phase Ib asset. So you can see on the right-hand side of this slide, where we showed the transacted value against the stage of the program at the time it was transacted. So the TM-led approach that we are taking will see us take more programs into early clinical development. And when we choose to partner them in the future, we expect to gain larger transaction economics like the Neurocrine transaction. So we also know the challenges that many companies in the industry face, particularly those with research divisions. They operate in linear ways with groups that are typically designed around narrow scientific domains, and these narrow scientific domains are led by functional heads and the functional heads enforce strict process protocols that require team members to turn to them for all key decisions. The lack of end-to-end coordination drives waste in efficiency and declining levels of productivity. Furthermore, it takes longer with the time lines, which destroys the net present value for innovative programs. So for these reasons that I've mentioned, and Matt will touch on this more later, we're transforming our R&D business to be 100% program-centric in its structure. So this means all programs have leaders that are empowered to iterate quickly and make decisions without deference to functional reporting lines. End-to-end program teams across R&D have all of the internal and external subject matter experts that they need assigned to support those teams and the program leaders are empowered and accountable for all decisions. The program-centric approach, we hope, will drive productivity gains. So now turning to the second objective, and this next objective is a midterm objective for the company, and it's focused on enhancing our group structure and its operational efficiency. So on the left-hand side of this slide, this shows you all the usual functional lines that companies have internally in this industry. Most companies rely on legacy in-house infrastructure, which can lead to high fixed costs and an inability to flex or scale rapidly. As Sosei is a relatively small company, we plan to do things differently. And going forward, we will extensively leverage external organizations to manage our cost base that we can scale up or down flexibly as required. And the right-hand side provides an example of some of the traditional core functions that we are prepared to virtualize as we grow in the future. And so this process has already started, and we're implementing a more virtual approach to our TM-led capabilities. So in April 2022, earlier this year, we partnered with Weatherden, a network of scientific and clinical development experts, so that we can flexibly tap into their resources as and when needed. So you see the range of services that they can provide on this slide. To date, Weatherden team members have provided subject matter expertise on a flexible basis to 4 of our programs, which has enabled us to iterate faster and make better decisions faster. So as we grow, the virtual approach will ensure that we do not create an unsustainable fixed cost base, which supports the quick win, fast-fail approach that we have embraced. So now I want to turn to the third objective, and this is one of our long-term objectives, and this is really to activate our biotech business in Japan. So going forward, it is our intention to build a pipeline in Japan to benefit patients who are waiting. And we plan to do this by 3 approaches. Firstly, for innovative programs that we discover in the U.K. We will, with selected programs, develop them in Japan for Japanese patients, and this is likely to start with an IBD program in the future. When we partner our innovative programs in the future with big pharma companies or biotech companies, we will seek to retain the territory rights for Japan at a minimum, so that we can develop them for Japan in Japanese patients. And this is what we did last year with the Neurocrine transaction where we retained rights for the M1 program. Lastly, we will seek to in-license or acquire late-stage innovative programs from U.S., European or other partners and develop them in Japan for Japanese patients, and this is part of our strategic growth plan to accelerate value creation. So we are a Japanese company and our long-term priority is to deliver innovative medicines to patients in Japan and globally via our partners. And so on this objective, I just wanted to touch on the fundamental drivers that support our thinking. So for many years, the Japanese market has been an afterthought for U.S. biotech companies with their drug launches. This has meant the Japanese patients with unmet medical need either wait too long for innovative medicines to arrive in Japan or sometimes they miss out altogether. So as I mentioned on the previous slide, over the long term, we want to be at the forefront of investing in Japanese patients. We believe the market fundamentals have changed and now support activating a disruptive biotech player in this market. A couple of the key highlights. Japan is the second largest pharma market globally, ex China, and we expect it to remain very large. Japan has a large aging population driving sustained demand and ability to pay. Japan has a very strong regulatory environment that is aligned with FDA and EMA practices, as well as broad-based reimbursement. It's a stable and pro-innovation market, driven by innovative specialty drugs. Japan-based biotech competitors are relatively conservative, which creates an opportunity for a strong company like Sosei. And Japan has become an attractive market of late for venture-backed businesses, which validates the existence of such investment opportunities. So long term, it is our plan in Japan to focus on underserved specialty therapeutic and disease areas. Long term, we will adopt a lean rational development and commercial model in Japan. And long term, we will build a core in Japan with the ability to maximize value from across the broader APAC region. And so on my final slide, this is a nice segue. The last long-term objective is to expand the company into new geographies. We believe the most natural place for us to expand beyond Japan is Asia Pacific, which we believe can be accessed efficiently without large levels of incremental investment. So overall, the Asia Pacific ex China market is approximately $70 billion, which is comparable to a major market like Germany when considered as a single block. On the left-hand side of the 9 APAC markets highlighted, 4 have pricing market access and clinical practice equivalent to the U.S. and the EU, so we believe the barriers to entry are quite low. That concludes our presentation. Thank you for listening for now. I'll turn to Matt Barnes, who heads our U.K. R&D innovation business to discuss our activities in the U.K. Thank you.

Thank you, Chris. Good afternoon, everybody. I would now like to focus on providing an R&D update along with my colleague, Dr. Rie Suzuki. Initially, this will focus on an overview of our key events over the last 6 months, followed by an update on our R&D operations and then a broad overview of our R&D portfolio and programs. Rie will then provide a more detailed update on 2 of our most advanced programs from our internal pipeline. So key event summary, last 6 months from March to September. This slide represents these key events. So starting at the top, in March, we announced our change in senior leadership to drive the company to its next stage of evolution. In April, we announced a strategic collaboration with Weatherden, as Chris has mentioned, which is a consulting group with significant expertise in clinical drug development and accelerating the translation of novel science into life-changing medicines for patients. To strengthen our translational medicine capabilities, I will discuss this later and establish a best practice approach. In addition, we further consolidated investment in our translational medicine capabilities through our expansion into a second facility in Cambridge at The Cori Building in May. This new facility houses all of our members in the translational medicine team under one roof. Also in May, to support our target identification and validation strategy, we announced a collaboration with a company called Kallyope, which I will talk about later. In June, our business development and some of our key members of our scientific leadership team, including myself, attended the bio partnering meeting in San Diego to ensure continued and open dialogue with potential partners of the future, and we also held our internal Scientific Advisory Board meeting chaired by our former head of U.K. R&D Malcolm Weir. In July and August, we announced key collaborations with Cancer Research UK and AbbVie and announced the acceptance of our IND for the M4 agonist with Neurocrine. In September, we were both proud and honored to receive an Informa Pharma Intelligence Award for our strategic collaboration with Neurocrine. And in addition, our CEO, Chris Cargill, was awarded Executive of the Year, and that brings us to today in October where we're hosting this R&D day. So we've had an extremely busy and productive 6 months and for many of the key events covered on this slide, I'll provide more detail in later slides. So on to R&D operations update. So this next set of slides really provides just some background to the company to refresh people's memories. So we're a world-leading drug discovery company targeting G protein-coupled receptors. And for those of you who are new to hearing about our company, we focus on G protein-coupled receptors, and we are the world leaders in drug discovery and early development. And we apply our proprietary StaR technology and structure-based drug discovery platform to discover small molecule therapeutics that modulate G protein-coupled receptors or GPCRs. Our headquarters are here in Tokyo. However, our R&D center of excellence is located in Cambridge U.K., and this is where the bulk of our employees are based. We are a science-led organization. 75% of our staff have a science background, the vast majority of those holding PhDs. Some other key items of note regarding our expertise include, we are prolific researchers and drug hunters in this area, having solved over 300 molecular structures to date from over 30 different GPCRs, and we've published more than 180 scientific articles, including 7 prestigious Nature papers, and we have over 500 global patents. We are highly skilled at working in collaboration with partners, and we work with more than 15 major global pharma companies and biotech partners, resulting in significant revenues to date. We have over 40 active programs, both partnered and in-house and have evolved this pipeline in recent years to specifically focus on 3 therapeutic areas: neurology, immunology and GI with an increasing focus on novel drug targets, which we believe is what potential partners want in the future. So this next slide -- the next 2 slides give us some background to this structure-based drug design or SBDD platform. The first of these slides describes our StaR platform. So as GPCRs are membrane proteins, they are inherently unstable with low expression, which makes the protein very difficult to work with. To address this problem, we introduced stabilizing mutations into the protein to increase the thermostability and expression. And this is what we call a stabilized receptor or StaR. We can use the StaR protein for a number of applications, and we've now successfully generated more than 70 GPCR StaR proteins. So our StaR technology underpins our structure-based platform, which we use as a powerful tool to support our drug discovery. Our scientists work closely together and can utilize this platform to generate new GPCR structures, identify hit compounds and subsequently optimize these compounds in a highly efficient and productive manner. As a result, we have achieved more than 25 preclinical drug candidates, molecules, for our in-house and collaboration partners and projects. So we are a company with world-leading highly productive platform but we do not intend to sit still. We want to continue to grow and evolve our platform and company. Since our change in leadership to drive the company to its next stage of evolution, we have identified several areas to focus on to maintain our global leadership position and support the next generation of growth. So for platform growth, we want to build on the strength of our industry-leading SBDD platform, drug discovery and early development position and also lead the next wave of growth through expansion beyond GPCRs and adding new technology capabilities. For target biology, we wish to entrench target biology into all of our projects to provide a greater understanding of disease processes which will allow us to define robust testable hypotheses, linking drug targets to cells to mechanisms of action to site of action and ultimately to clinical efficacy. The translational medicine, we have now fully integrated our preclinical and clinical capabilities together to support this translational medicine approach, which is to fit for purpose and best practice. As mentioned previously, this is now all under one roof. Being program-centric, Chris touched on this earlier, since the beginning of 2022, we've adopted a program-centric approach, which really does empower and align team structures with aligned incentives. Programs are now accountable for their own R&D budget, risk management and project plans. Functions exist to support these projects. And of course, the patients and the patient focus. We absolutely must keep patients as the focus of what we do on a day-to-day basis and continue to strive to deliver innovative quality drugs to patients faster, but recognizing that partnering some projects can deliver clinical validation earlier. And of course, underpinning all of our world-leading science is our aim for operational excellence and best practice. This means our aim is to be as efficient as possible with respect to all the resources that we have available, providing the appropriate resources to the right program at the right time to give our programs the best probability of success and return on investment. We have now employed project managers into an enterprise management office to provide more accurate information to senior management to store data in a format that facilitates external communication faster. I would now like to focus in more detail on areas of platform growth. We continue to strengthen this area by adding new complementary technologies. Shown here in the slide are our existing StaR and SBDD technology but also included our additions to this, namely CryoEM, protein binder toolkit, chemogenomics GPCR library and DEL screening or DNA-encoded library. I'll describe these in more detail in the next few slides. So firstly, Sosei Heptares has been an early adopter of CryoEM with continued growth. Richard Henderson, our Co-Founder and Scientific Advisory Board member, won the Nobel Prize in 2017 for developing this technology. We continue to expand our CryoEM capabilities and now offering routine CryoEM structure determination to support our SBDD platform. To date, over 45 structures of 15 -- of more than 15 unique GPCRs have been determined by CryoEM at Sosei Heptares in both agonist and antagonist confirmation. The example provided is a GPCR from the family of [indiscernible] receptors, which are longstanding drug targets implicated in a range of diseases. Historically challenging structure determination, which is now approachable with CryoEM, and we've now actually determined multiple structures also of Family A, Family B and Family F receptors by both x-ray crystallography and CryoEM to enable our structure-based drug discovery. Secondly is the development of our protein binder toolkit. So CryoEM structure determination often benefits from the introduction of additional protein domains, which include domains fused to stop the StaRs or introduced during expression or purification. Fusion partners, mini G proteins, nanobodies, antibody fragments have all been successfully used. Protein binders like this offer clear benefits in structure determination for other non-GPCR membrane protein classes. And establishing a more routine and robust platform in this area is included as part of the Cambridge site lab expansion plans. Our third technology is DEL screening or DNA-encoded library screening. DEL screening offers an alternative strategy for HIT identification in early drug discovery and involves chemical libraries of 15 billion to greater than 1 trillion compounds, accessed through partners to allow unprecedented levels of chemical diversity. The StaR proteins we generate that I mentioned previously, can be panned with known 2 molecules to identify new binding sites, and we have now used more than 10 StaR proteins in this DEL screening format in both agonist and antagonist mode. Lastly, we have been assembling a bespoke chemogenomic GPCR library screen over the last few years, which we can use with wild-type or non-StaR protein. This in-house library represents a 50,000 compound sets, which has been very carefully curated using our proprietary GPCR structural chemogenomics and pharmacology knowledge. The library contains GPCR diversified ligand sets covering more than 390 GPCR ligand modality combinations and more than 10 GPCR targets have been screened to date from a mixture of both internal and partner programs with quite a lot of success. So pioneering future innovation. So these core and additional technologies will, of course, be used to strengthen our platform in GPCRs. However, we are also exploring future innovations through the use of these technologies when applied to non-GPCR membrane protein targets such as ion channels, transporters, integrins, and oral small molecule alternatives to biologics. We will look to collaborate with partners which have complementary technologies in this area, and one current example of this is our collaboration with Metrion, which specializes in ion channel drug discovery. Ultimately, this future innovation concept will allow us to take a broader structure-based drug discovery approach to all membrane proteins expanding our opportunities for new drug targets and future growth. So Chris showed this slide earlier. So we previously identified what we think are the 3 big challenges in drug discovery and development, choosing the right target, discovering a therapeutic agent and conducting the right patient studies. Our approach to these challenges will result in choosing the right drug target developing the right asset to test the right therapeutic hypothesis, which will be driven by our individual programs. A further key area of focus is developing this project or program-centric approach throughout the organization. As mentioned previously, since the beginning of 2022, we've adopted a program-centric approach, which empowers and aligns team structures with aligned incentives. Programs are now accounted for their own budget, risk management and project plans. And then the last slide is this focus on clear unmet medical need. We always need to be mindful of the patients and our overriding aim to deliver innovative quality drugs to patients faster. Our focus will be on areas of unmet medical need and a clear understanding of treatment paradigms and target product profiles early will ensure we work on projects that have real potential clinical benefit. Okay. So now I will focus attention on our R&D portfolio and projects in this next section. So this slide represents an overview of our current R&D portfolio or pipeline, with projects or programs phased by discovery, preclinical development or clinical stage. The pipeline is also sectioned into partner programs listed in the top half of the slide, those programs where we co-develop in the middle of the slide and our internal projects or programs at the bottom of the slide. So I will now provide a brief update on the Neurocrine and Pfizer collaborations highlighted in this slide. So firstly, this slide relates to our novel muscarinic receptor agonist collaboration with Neurocrine Biosciences. As highlighted in the quarterly results presentation in August, Neurocrine has confirmed that it will initiate a placebo-controlled Phase II study to investigate 568, formally 878, the selective M4 agonist as a potential new treatment for schizophrenia later this year. This clinical development milestone triggered a payment of USD 30 million to associate our tariffs from Neurocrine. 568 represents the most advanced candidate under this multi-program collaboration but also of note is the intention to initiate Phase I studies on both a dual M1/M4 agonist and an M1 selective agonist in 2023. Sosei Heptares is working extremely closely and effectively with Neurocrine on this collaboration. I will now provide an update on Pfizer, Pfizer-532, a GLP-1 agonist which Pfizer recently presented at the EASD meeting in September. Please note, this asset was discovered by Pfizer scientists during a research collaboration in which Pfizer accessed Sosei Heptares' proprietary technology to develop and enable structure-based drug discovery for GPCRs. The study was a Phase Ib trial, which included cohorts of participants with type 2 diabetes and obesity who receive 532 or placebo once daily with a rapid titration over 4 to 6 weeks to achieve high doses. Early clinical data from this study presented by Pfizer suggests observed half-life of the molecule is supportive of once-a-day administration. In addition, a robust dose-dependent declines in mean daily glucose were observed with once daily 532 in participants with type 2 diabetes. And while longer duration of intervention is required to assess the effect of treatment on body rate, reductions were also observed with dosing with 532 for 4 to 6 weeks with mean decreases from baseline up to 5.5% in participants with type 2 diabetes and approximately 5.2% in participants with obesity. The safety and tolerability profile was found to be consistent with the GLP-1 class and MOA with adverse events generally mild. Most common AEs were GI-related. In summary, 532 offers a potential best-in-class small molecule against an already well-validated drug target GLP-1 and has huge potential in indications such as type 2 diabetes and obesity. I will now provide a brief update on our multi-target collaborations. We've made excellent progress in our multi-target collaborations I've already made reference to our collaboration with Pfizer which includes the aforementioned GLP-1 agonist 532. This has been an incredibly productive collaboration and has provided 3 clinical-stage assets since inception 7 years ago. In addition, I would like to make reference to 3 other discovery-based collaborations with large pharma companies, Genentech, Takeda and AbbVie. These collaborations have been progressing extremely well over the last 2 to 3 years with early discovery milestones achieved with each partner. More specifically, in our Genentech collaboration, we've achieved 5 milestones since 2019 with targets for both small and large molecules. And I would also like to draw your attention to the recent second collaboration with AbbVie, which I will cover briefly on the next slide. So in August, we were proud to announce a multi-tier collaboration with AbbVie to develop novel medicines targeting neurological diseases. This follows the 2020 agreement which was focused on inflammatory and autoimmune diseases. We received an upfront payment of $40 million and a further potential $40 million in near-term milestones. I will now focus on new target identification and validation collaboration partners. So we started this initiative around 18 months ago and I've presented this concept on previous occasions. However, just reminding the audience to the background as its useful context to some of our collaborations we've recently started in this space. So the aim of this initiative is to support the identification and validation of new GPCR drug targets across our core therapeutic areas, GI immunology, immuno-oncology and neuroscience. To do this, we plan to establish strategic external relationships to leverage top end external company [indiscernible] platform and databases and validation capabilities to supplement these efforts. We believe that this would maximize our chances in identifying and validating hot or novel GPCR targets with direct links to disease and disease mechanisms. And together with our existing SBDD platform, this initiative would fuel our pipeline and generate higher value creation for the future. So we've been extremely successful in prosecuting these strategic collaborations. So let's look at some of the partners in more detail. So in addition to our first collaboration with InveniAI AI in 2021, we've also established 2 key partnerships in the last 10 months. Firstly, in January 2022, we signed a deal with a company called Verily to identify new GPCR drug targets and subsequently generate novel drug candidates in immune-mediated diseases. The research collaboration combines Verily's immune profiling capabilities and Sosei Heptares' StaR platform and SBDD to identify GPCRs expressed in immune cells, enhance our understanding of their functional relevance and prosecute them as potential drug targets in immune-mediated diseases. Secondly, in May 2022, we entered into a collaboration with Kallyope to identify and validate novel gastrointestinal GPCRs for drug discovery. This agreement will leverage our GPCR diversified compound library and GPCR expertise with Kallyope's gut-brain access platform which includes an organoid phenotypic screening approach. Novel GPCR drug targets emerging from this collaboration will provide new opportunities for potential therapeutic intervention in GI diseases. And then lastly, I will focus on our 4 wholly-owned programs from our internal pipeline. So for our internal pipeline, we are advancing these 4 wholly-owned programs. On the left is GPR-52 agonist program, which is a novel GPCR, which presents opportunities in schizophrenia and psychosis. Next is our H4 antagonist for atopic dermatitis, EP4 antagonist for immunosuppression in solid tumors and on the right-hand side our EP4 agonist for IBD. We are extremely excited about these 4 internal programs as they offer opportunities across our key therapeutic areas of focus. They represent a mix of novel and validated drug targets which allows for some mitigation of risk while providing a great opportunity for our translational medicine team to demonstrate the best practice approach we strive for. Advancing this internal programs into the clinic will ultimately provide Sosei Heptares with higher value creation. So I will now hand over to Dr. Rie Suzuki who will provide a more scientific detail on 2 of those programs you just saw, the EP4 antagonist and the EP4 agonist programs. Thank you.

[Interpreted] Thank you very much, Matt, and thank you very much, Chris. Good afternoon, everybody. So today, I'd like to take the opportunity to share with you information on 2 of our programs, so both targeting a GPCR, for which we see exciting opportunities across multiple therapeutic indications, and this is the EP4 receptor. So this represents a very good example of how we have leveraged a unique StaR platform and expertise in structure-based drug design to develop novel, high-quality drug candidates. And you've heard from Matt, this is an exciting time as we take -- we start to see a number of our assets moving into clinical development. Among those, we'll be talking today about the EP4 receptor antagonist, which is being progressed for the treatment of cancer. In the second half of the presentation, we'll highlight our opportunities for geo-restricted EP4 agonist, which has been positioned for inflammatory bowel disease. So EP4 receptor. So EP4 receptor plays a diverse role in regulating numerous aspects of physiological function, including immune cell regulation. The endogenous ligand is a mediator called prostaglandin E2, and this lipid is synthesized by the COX enzyme and is released at sites of inflammation. Now in the case of cancer, what we know is that both expression COX-2 and the PC2 are elevated within the tumor, and this creates an immunosuppressive environment. And it's one of the mechanisms that's exploited by cancer cells to escape immune surveillance, allowing the tumor to grow and also proliferate. So the project hypothesis here is that by blocking PC2 signaling with an EP4 antagonist, we can restore immune surveillance. And when given in combination with agents like checkpoint inhibitors, this will result in robust antitumor activity. Now if we turn to chronic inflammatory diseases like IBD, what we're after is the converse. So here, we're looking to dampen down the excessive inflammation, restore homeostasis and allow the damaged gut to heal. Now given the unmet needs in both these disease areas, there is a good rationale to go after with an agonist and an antagonist approach. And we've maximized our structural understanding of this receptor to design high-quality molecules for EP4. So in the next session, we'll provide an overview of each of these programs. And the first will be the EP4 antagonist program for immuno-oncology. Cancer still remains a leading cause of death worldwide. And according to WHO, it accounts for roughly 1 in 6 deaths. Now current treatment of cancer, this involves a combination strategy, which includes surgery, radiotherapy and pharmacological approaches. In particular, immunotherapy, which harnesses the power of the immune system to attack tumors has received a significant spotlight as a potential novel approach for the treatment of cancer. Now this next slide here illustrates how patient survival has improved over the years with the introduction of immunotherapy agents. What we can see here is that the survival rate is improving, but even with checkpoint inhibitors like PD-1, benefits are only seen in a subset of patients and not everyone will respond. So there's clearly room for improvement and this once again emphasizes the need for improved anticancer therapies as well as better combination strategies. So why my EP4 represent a good target for cancer? So the tumor microenvironment is a very active and dynamic environment. So within this complex environment, cancer cells have developed ways to evade the immune response, allowing the tumors to proliferate, metastasize and also develop a resistance to therapy. So crucial part of developing novel, effective therapies, therefore, relies on lifting the immunosuppression. And one of the key contributors that drive this immunosuppression is PG2 and COX-2, both of which are upregulated in the tumor microenvironment. We know the high PG2 burden in the tumor links to poorer clinical outcomes. So this highlights the opportunity for novel therapies like EP4 antagonist to restore immune hemostasis and drive an active antitumor response. So based on the strong biological rationale, the goal of Sosei Heptares EP4 antagonist program was to identify a potent and selective antagonist molecule, which can be delivered orally once daily with a low dose. Now using knowledge of the EP4 structure, and through successful application of structure-based drug design, we've been able to make rapid advances in chemistry and this little identification of a novel, high-quality molecule HTL-39732, which is now the lead molecule moving into Phase I clinical studies. On the right here is a snapshot of the competitive landscape. And we can see that a number of EP4 antagonists are moving into early clinical stage development. Now these are being explored either as a monotherapy or in combination with different I-O mechanisms. So here's an overview of HTL-39732. We have a molecule that has high potency in selectivity. It also demonstrates excellent safety profile and takes all the desired characteristics for a candidate drug molecule. On the right is the profile of HTL-39732 in an animal model where we're measuring the tumor growth over time. And what we can see here in the red line is that the EP4 antagonist in combination with a PD-1 checkpoint inhibitor produce clear reductions in tumor volume. This data provides very strong promise for this novel combination approach for the treatment of cancer. So to summarize, we successfully utilized the proprietary StaR platform and structure-based drug design to develop high potency EP4 antagonist HTL-39732. As many of you will know, back in July this year, we entered into a partnership with CR U.K., Cancer Research U.K., to advance 39732 into Phase I clinical trials. Now through this partnership, we'll be exploring the potential of this drug to treat a wide range of cancers in combination with other immunotherapies. So this really represents a very exciting time for our company, where we have the opportunity to move one step closer to bringing impactful medicines to patients in areas of unmet need, and this aligns with our strong patient focus, which you heard from both Chris and Matt. Now with that, we'd like to share a short video clip from medical adviser at Cancer Research UK Center for Drug Development, Dr. [indiscernible] will share his perspectives on the future of novel immunotherapy agents, such as HTL-39732 to help tackle the challenges in treating difficult cancers. Please take a moment to enjoy the video. [Presentation]

[Interpreted] Okay. So in this next section, we'd like to now move on to the second program, which is an oral EP4 agonist for inflammatory bowel disease. Inflammatory bowel disease is a chronic relapsing disease of the gut, which can be broadly divided into 2 types: ulcerative colitis and Crohn's disease. Now in both these disease states, patients typically cycle through episodes of active flare and remission, and the strategy of current therapies is largely focused on suppressing the overactive immune system. But this can be associated with safety issues and can put patients at risk of serious infections and immunosuppression. Now over the past decade, biologics have gained an important place in the treatment of IBD. But it's now that only 30% of patients are maintaining a good response. So effective control information is absolutely critical. And when medications are no longer effective, complications may develop. And for some unfortunate patients, this could lead to surgery to remove part of the affected bowel. Hence, the goal of therapy is to minimize these cycles of inflammation. And in a while, we'll explore why there is now a strong focus on trying to promote mucosal healing. So this next slide illustrates some of the biologics that are widely used in IBD. Now anti-TNF therapies such as Remicade and Humira, these have become the mainstream treatments for IBD. If you look across the various biologics, the response rate is generally around 20% to 40%. The challenge in the development of novel IBD therapy has been defined ways to break this efficacy ceiling. Now in addition to this, one of the shortfalls of current treatment is the safety, and there's a high need for novel safe therapies that can transform this landscape. So what are the key benefits of EP4 agonist in IBD? One of the key reasons why patients break out of remission and undergo repeated cycles of flare is using an incomplete repair of the gut barrier, which forms the first line of defense. When the barrier is not healed, it allows bacteria and other antigens to enter the body and trigger strong inflammatory response. So current available therapies do not directly repair the barrier, and this is where an EP4 agonist could potentially fill the key gaps. This, therefore, offers a very promising approach to tackle information and may complement existing IBD therapies to bring clinical benefits to patients. The benefits of EP4 agonists are supported by a small Phase II clinical study conducted by Ono Pharmaceuticals where ONO-4819 demonstrated early signals of efficacy in patients with mild-to-moderate ulcerative colitis. Now in this study, there were improvements that could be detected within 2 weeks of treatment, once again highlighting the potential promise of this approach. So the chemistry strategy for our EP4 program at Sosei Heptares is unique in that we've leveraged our strength in structure-based drug design to design novel GI-restricted compounds. Just illustrate how our molecules differ from other literature molecules, I'm going to turn your attention to this figure on the right, which illustrates a design property space that we were aiming to target. So KAG-308, which is an EP4 agonist molecule developed by Kaken Pharmaceuticals is a high-potency compound, which is well absorbed following oral administration, and these molecules generally sit on the top right-hand corner. The unique goal of our EP4 agonist program was to design molecules which act locally in the gut and display minimum systemic absorption, and this represents a property space that, to our knowledge, has not been explored by many competitors. And the design strategy is highly enabled by having a structural understanding of the receptor. Now to illustrate how the profile Sosei Heptares EP4 agonist if it's from previously developed EP4 agonist, this next slide here highlights a number of key differentiation areas. The first is the low permeability in Sosei Heptares EP4 agonist designed to have limited absorption, which we believe will lead to an improved safety profile. Secondly, by reducing the amount of drug that's absorbed, we're able to deliver the drug to the most distant regions of the gut, and this is beneficial for diseases like IBD, where inflammation is localized to distal colon. This next slide shows preclinical data that highlights the potent anti-inflammatory and barrier promoting properties of this mechanism. Now overall, this data is consistent with the preclinical literature, where EP4 agonists have been shown to improve gut repair and supports the early efficacy observations reported in the Phase II IBD study with ONO-4819. So just to conclude this section, we've developed a novel GI-restricted EP4 agonist molecule, and this represents an exciting approach that has the potential to address areas that are not effectively managed by current treatments. And with that now, we'd like to share another video clip. This time from a consultant gastroenterologist, Dr. Tim Raine at Cambridge University Hospitals. So we asked the opinion from an IBD clinician's perspective, where the unmet needs are and what opportunities might exist for novel mucosal healing agents like EP4. Please take a moment to enjoy the clip. [Presentation]

[Interpreted] Okay. So we hope that this has provided a flavor of the exciting pipeline that's building at Sosei Heptares. And as we heard today, Sosei Heptares' StaR platform continues to support our SBDD and this has successfully enabled the development of these two high-quality assets, which we hope to progress into the next stage of clinical development. With that, I'd like to conclude our presentation. We'd like to once again thank you for your kind attention for joining the Sosei Heptares R&D Day. Thank you.

[Interpreted] Thank you very much for your attention. We now end the presentation part. So we will move now to the Q&A. After taking a look at the presentation, this is R&D day. So the information was very detailed, I think. So I hope you could ask questions and clarify whatever questions you have. As I mentioned earlier, in this room, please raise your hand if you have any questions. I will point you and our staff will bring over the microphone. Please state your name and your affiliation first. And the participants over the web, I'm starting to receive questions over chat already, and we will answer those questions too as much as time allows. So that's all from me. Any questions? Please raise your hand. Yes, a gentleman over there.

Jefferies Securities, Miura speaking. I have a few questions. First of all, in multiple pages, you talked about translational medicine, and I am very interested in this. In particular, quick win, fast fail, you will achieve that. And I think that, that is the sweet point and that is the key point is it? But you will increase the pipeline in a productive manner that, I think, will be the requirement. Otherwise, after you fight fast fail, your pipeline will shrink. So I felt that you have confidence that you can go with this. So am I understanding correctly? And in order to realize high productivity, it is difficult to see this from an outside person. So what are you realizing to realize this high productivity and other mega ventures and the pharma companies in Japan and abroad, if there are good reference or examples, best practices? I would like to know.

[Interpreted] Thank you for the question. So first question was about the translational research, a quick win, fast fail. So your question is on this strategy. And if we do this, you may worry that the pipeline will taper off. But that will not be the case. So any other benchmarking companies that you benchmark, so we will answer this question first about the productivity of R&D. Matt will answer. So Chris, could you start?

Sure. I'll go first. And yes, and then Matt can follow up. I mean, look, we're in a very unique position in our company relative to a normal biotech, which may be focused on developing 1 or maybe 2 programs. Today, we've talked about some of our StaR programs. What we haven't talked about is the 10-plus other programs that are in discovery and our ability to continuously create new programs. So we're going to adopt a quick win, fast fail approach because we have no fear that we will run out of programs to discover and develop. If you think about what our specialization is, we're very much focused on GPCRs. Only 30% of GPCRs have been drugged to date. There is a massive opportunity for us that certainly will spend the next few decades for us to continue drugging GPCRs that we haven't drugged before. So if we just talk about what we can do internally in the area of our specialization, there is zero fear that we will run out of potential programs to innovate with. What we haven't talked about is also the productivity of this platform and the economics that generates gives us the opportunity to also search for programs that we can in-license from external partners and develop as well. So it's for that reason that we can adopt quick win, fast fail because we only want to be developing the very best programs that are going to make the biggest difference for patients, not just every program that we can work on. So that's the thing that differentiates us a little bit. We don't have that fear of running out of things to work on. We've got more than enough programs as it is, but we can continuously generate more through our discovery engine. But I'll let Matt talk a little bit about what we do in prediscovery and discovery, which fuels our pipeline.

Thanks, Chris. So yes, as Chris mentioned, so for me, it's not necessarily thinking about the fast fail as such. It's actually more about asking the right question. So I think if you ask the right question, and the answer is do not proceed, that's okay. But it's a case of trying to identify what that question is early. So I talked in my presentation, I talked about robust testable hypotheses. So it's about making sure we have these entrenched in our programs so that we know what that question is, so that we have a very clear answer, whether it's a go or no go decision. From a sort of pipe of risk of the pipeline shrinking, I think if that happens, we are doing something significantly wrong. I think some of the things we've put in place recently that Chris highlighted is this pre-discovery phase, which is, I think, is highlighted on the top left, if my Japanese is correct. Okay. So it says pre-discovery. So we created pre-discovery phase, maybe 2 or 3 years ago. And the reason that we did this was to really provide a time and space for early exploratory projects to build confidence in targets. So we use this phase, and we're asking things like questions about the target validation. We're asking can we generate hit compounds. Can we find hit compounds? Can we generate a structural biology position? So we're putting all the building blocks in place before we push the button to move forward to discovery. So the idea is that only programs we have confidence in, we move into discovery. So I'd like to think that once those programs are moving forward, we've already weeded out the programs where maybe that question is wrong, but we've done that very, very early on.

[Interpreted] Thank you very much. So if you have your next question, please?

[Interpreted] Yes, my second question. So EP4 antagonist, on Page 49, you showed us this competitive landscape. So it seems like you have other projects up and running too. So on Page 58, Ono and Kaken comparison and you talked about potency and the selectivity and it's highly potent. You showed us highly effective. And so in the antagonist, what about the competition? How does competition look like?

[Interpreted] So the competition of the competitive drug in the antagonist. So Matt will talk and then Dr. Suzuki will also follow.

I'll start and then maybe I will pass on to Rie. So EP4 antagonist, this is more of a fast follower type approach. So many of these competitors, actually, if you look at the assets around those programs, they're actually repositioning of older molecules. And so they actually require significantly high human doses to achieve a good target occupancy. So we think we believe they haven't fully been optimized for an immuno-oncology application. However, they are very, very useful because they might give us some early clinical validation from a mechanism point of view, which gives us confidence moving forward with our best-in-class molecule, which has been designed specifically for this particular approach. I think the only difference and Rie might talk about this is the Ono BMS molecule, which I think is a good molecule, and there was a recent publication on this. I think it yet to fully come out. But from the abstract, it looks like there is some confirmation of a pharmacodynamic effect in cancer patients. So that really gives us some confidence that we're in the right space in terms of this mechanism.

[Interpreted] Thank you very much for your question. So yes, in terms of the EP4 antagonist, yes, there are a number of competitors right now moving into the early clinical development, as you can see on the slide here. As Matt said, a number of these companies, we don't know fully about the human dose. But for example, if we take an example like E7046, that one is going in several 100 mg. Now we believe with our molecule that in order to target IC90 cover over 24 hours, we're able to go under 100 mg. So there's clearly an opportunity for at least a class matching compound. And we've been able to do this through the understanding of the EP4 structure. And I think it's fair to say that cancer is -- there is a lot of huge market in cancer. And as we heard from the doctor as well, there are still cancers whereby patients don't actually gain adequate symptom relief or disease relief, even with the introduction of new IO agents. And so there's a huge opportunity here to actually utilize our understanding of the biology to guide us on the right combination strategy with a variety of different IOs. And I think that's what many companies have started to see. And we see that there is a tremendous opportunity here for probably more than 1 agent in this space. So yes -- no, we believe that there's a huge opportunity that can make a difference to these patients for the EP4 antagonist.

Just a final point. So on Rie's last point, PD1 is a great example, right? So several billion dollars of sales across multiple PD1 assets and people are still making them, right? So if you get it right, it's a huge opportunity. Yes. So I wouldn't worry so much about the competition in this space. Thank you for the question.

[Interpreted] And then the person at the right from my side and left from the venue.

My name is Matsubara from Nomura Securities. Thank you very much for your explanation. I have 2 questions related to EP4. The first 1 is in vivo trial, this was targeted for colon patients, but what were the situations for the others? And also, this is administered [indiscernible]. But if there is an infiltration and metastasis and if the tumor is large, then if there is a heterogeneity then what kind of efficacy would your drug have?

[Interpreted] Then I think I have to ask Matt and Rie to respond to these questions.

Thank you. So if I heard the question correctly, so this is the EP4 antagonist program for cancer. So the question was -- the first question was about the in vivo data. So you're very -- you noticed very carefully that this was with colon colorectal tumor in vivo, and that's correct. And Rie, I think you can talk about this more, but we very much use the colorectal tumor preclinically as a proof of concept. So we could go and do lots more preclinical studies on different tumor types, but I think we'd really prefer to do that in the clinic. And that early clinical trial will, as was described, will represent a number of different cancer indications. The second one, I think, was about some heterogeneity and metastasis. So if I got the question correctly, I think, again, I think we would look to try to address that in early clinical studies. We do have and we are working towards a biomarker signature. So I think that might help address the heterogeneity that we might see in tumor types. That's something that we're currently working on as part of our clinical development plans. If we can identify a biomarker signal or signature which really allows us to stratify patients, cancer patients that's going to really help address that point of heterogeneity. I'll now pass on to Rie.

[Interpreted] Thank you, Matt. Thank you very much for the question. So yes, in terms of what other cancer types, I think one of the -- our strategies will be to go for cancer types where the PG-2 levels and COX-2 levels are highly upregulated. And that includes cancer types such as the head and neck cancer, colorectal cancer certainly is another one. We do know also that the gastro is also gastroesophageal cancer sorry, I can't pronounce that very well. That is also high in PGE2 and COX-2 signature. So here's an opportunity by -- if our hypothesis is that PGE2 and COX-2 drives this immunosuppression, the natural thing will be to choose cancers, which have got these high signatures and we can start to select patients or prioritize that in the first instance to go and test the hypothesis. And that's exactly what we're planning to do. In vivo studies, I think what we can say is that we see remarkable efficacy in combination with PD1. And I think you saw one of the slides here, whether you can show -- yes, this one here. The red line here shows the fact of our EP4 antagonist together with the PD1 checkpoint inhibitor. And what we can also tell you is that in animals, which have been treated with this, if you rechallenge them once again with the [ CT26 ] tumor cells, these animals will reject the tumor. And so there's a very, very long lasting efficacy that you can demonstrate in. So now we've switched the immune-tolerant phenotype to more tumor or wear phenotype. And that's a really, really key important aspect of this mechanism.

And then I have a next question related to GLP-1 agonist. Competitors or Chugai and Lilly and compared with [indiscernible] hemoglobin A1c was minus 1.77, and the rate change was a 4.7 kilogram, not much difference from you. But is there any superiority in your product at the moment? And I would like to ask Matt to respond to that question.

Thank you for the question. So this relates to the Pfizer GLP-1 532 asset. So you mentioned or made some reference to some figures about HbA1c and body weight reduction. I think we are very encouraged, I think, by the data that Pfizer presented on 532. It shows some robust changes in some of the endpoints that were measured. I think one thing we have to bear in mind, which actually Pfizer did refer to when they made this presentation, this was a 4- to 6-week study. So I think you have to be quite careful in comparing across other GLP-1 agonists and make sure you're comparing to a similar time, time of study. Certainly, for things like body weight and HbA1c, you would want to look the effect on those endpoints in longer-term studies. I think Pfizer included those endpoints as an early sign, and I think we would be encouraged to see some effect or we look forward to seeing that molecule in some longer-term studies. Thank you.

[Interpreted] Thank you for your questions. So next question, please. Yes, at the front, please.

Hidemaru Yamaguchi from Citigroup. So I have one quick question on the PF-532, and there is a discussion on the [indiscernible] regarding to the quick titration because these are the Phase Ib and Pfizer said, there's going to be more different titration in the Phase II. And [indiscernible], does it make sense in a sense that do you believe that [indiscernible] titration will be avoided on the Phase II program on the 532.

Yes. Thanks for the question. I think that's almost a multimillion dollar question. I think, yes, I think in answer -- I think the adverse events that were observed in that Pfizer study, they're very consistent with that mechanism and Pfizer's response to this question was that they would do a slower titration and they believe that, that would alleviate -- they have lots of experience in doing trials with GLP-1 agonist. So I'm sure that they have everything in hand. Yes. So I think we have to wait for the study. We have to wait for the study, but I'm sure absolutely Pfizer know what they do.

Second question on EP4 agonist, you show some good reference on the EP4 agonist, but you gave me some comparison between the Kaken product and Ono product as well. But it looks -- correct me if I'm wrong, it looks like the situation is the same as the ASA situation in the sense that they should be -- if it's kind of stay there at the cut and a longer as long as possible, then the drug works in a sense -- is that product matter or it's more the formulation matters, just stay there like using a more like long-acting drug.

I can start, and then I'll pass to Rie. So yes, so I think if you go to the next slide, yes, yes. So on the left-hand side, I think that's really the best diagram, best scheme, I think, to show the concept. So those agents, the ONO and the KAG-308 molecules, so they have oral absorption, so they get into the bloodstream. So they exert some efficacy, I think, which Rie did refer to. But of course, they also -- if they're systemically absorbed, they also have this cardiovascular change. So what we've done is we've used the chemistry and structural knowledge that we have around EP4 to add physical chemical properties to the molecule to restrict it to the GI and minimize the systemic absorption. So the theory the concept is you maintain the efficacy where you reduce the cardiovascular events.

[Interpreted] Maybe I can add a little bit more. Yes, so ONO-4819, that was given actually intravenously. So it's a systemic molecule. And KAG-308, once again, it is different from our compound in a sense, as Matt said, it is systemically absorbed. And the key difference that we see here is that if we think about the localization of EP4, we know these receptors are present in epithelial cells. We know it is on the luminal side, which all along the gut. And that's one of the key site of action, whereby these molecules are able to tighten the barrier essentially. And so we're maximizing the topical action of EP4 to be able to kind of go all the way down into the gut and to essentially line the gut. And in order to do so, we believe that our molecule has the right physical chemical properties that allow us to, if you like, paint the gut all the way down to give us the maximum efficacy, as Matt said, in the absence of any systemic safety, which -- one of which will be cardiovascular effect. So that's our strategy.

So your target to be the same level of not ASA, but more on biological level, which you're looking at about?